Australian parents facing crippling cost-of-living pressures are paying for childcare almost twice the OECD average, a survey shows, with the system also failing to meet the needs of families at low income and those living in the bush.
- The ACCC recommends considering price caps for hourly childcare rates.
- Government spending on parental subsidies expected to reach $12.9 billion this fiscal year
- The ACCC today released a draft report on financial data for the childcare market.
An average earning Australian family with two children spends 16 percent of their total budget on childcare, compared to the OECD average of 9 percent, according to the Australian Competition and Consumer Commission ( ACCC).
This is despite the federal government’s growing spending on parental subsidies, estimated at $12.9 billion this fiscal year.
The ACCC recommends that price caps be considered beyond the current hourly rate, supported by a “credible threat” of government intervention.
“As part of a government’s market management role, a strong price monitoring role, supported by a credible threat of additional interventions, could support the indirect price discipline of capping hourly rates,” the report says .
The ACCC has spent the year reviewing the finances of the childcare market and today released a draft report on which it will seek feedback before delivering a final report by New Year’s Eve.
He supports a wider Productivity Commission review of an “ambitious policy” that Prime Minister Anthony Albanese adopted at the last election to deliver universal childcare.
How does the childcare market work?
Not good, considering the government’s goals for equal access and affordability.
The study found that childcare operators target the most profitable areas in the wealthier suburbs of Australia’s biggest cities, meaning prime areas are most likely to have places and competition.
“As a competition and consumer regulator, we have carefully examined the childcare sector and its impacts on consumers. We have found that market forces in current policy environments do not guarantee not accessibility and affordability for all children and families in Australia,” ACCC President Gina Cass said. -Gottlieb said.
The draft recommendations include that the government consider intervening to ensure supplies in remote areas, as well as additional, targeted support for First Nations communities.
The need for reform is so great that the ACCC is recommending the government go back to first principles and think about what it wants to achieve with childcare spending demanding ever more budget.
What else did the regulator find?
The study found that Australia’s child care subsidy (CCS) system disproportionately affects people on low incomes by penalizing parents who do not work full time.
Under the so-called “activity test”, the amount of subsidized care for parents increases depending on the number of hours per week they spend studying or working.
“The current activity test means that people in low-income households who are looking to increase their working hours and therefore need more childcare face a higher proportion of out-of-pocket costs , because this additional childcare is relatively more expensive for them.” » said Ms. Cass-Gottlieb.
Industry and parent groups have long called for this change, but, with an estimated annual cost of $1.3 billion, the government did not act on the change in its recent budget.
For-profit providers have higher profit margins and pay their staff less
The ACCC found that not-for-profit providers were more likely to pay their staff above awarded salaries and that labor costs were the biggest challenge for providers.
It recommends the government also consider policies to address skills shortages and improve staff retention.
The study found that child care is generally cost-effective because it is supported by guaranteed government revenue.
For-profit child care operators earned an average profit margin of 9 percent, compared to 6 percent for nonprofit operators.
“We found that margins are higher, on average, for most for-profit daycare child care providers, as well as for daycare child care providers in larger cities and advantaged areas and for centers providing better quality care,” Ms. Cass-said Gottlieb.
What is happening now?
The ACCC is calling for submissions on these recommendations by the end of October through its website.
Calls for price caps and a credible threat of enforcement will likely receive a strong response from industry groups.
He says these comments will inform his final report to the government, which he must submit to the treasurer by December 31.
The Productivity Commission’s review of what universal childcare could look like in Australia is expected by June next year.